Buy-side vs. sell-side analysts' earnings forecasts. In a study published in Financial Analysts Journal (Jul./Aug. 2008), 3526
Question:
Buy-side vs. sell-side analysts' earnings forecasts.
In a study published in Financial Analysts Journal (Jul./Aug. 2008), 3526 forecasts made by buy-side analysts and 58,562 forecasts made by sell-side analysts were researched. The relative absolute forecast error was determined for each. The mean and standard deviation of forecast errors for both types of analysts are given below.
Buy-Side Analysts
Sample Size: 3,526
Mean: 0.85
Standard Deviation: 1.93
Sell-Side Analysts
Sample Size: 58,562
Mean: -0.05
Standard Deviation: 0.85
Construct a 95% confidence interval to estimate the difference in the mean forecast error of buy-side analysts and sell-side analysts.
Note: Define forecast error of buy-side analysts as the first population.
a.) What is the difference in the sample mean forecast error of buy-side analysts and sell-side analysts?
b.) What is the standard error of the difference in mean?
c.) What is the lower bound / lower limit of the 95% confidence interval?
d.) What is the upper bound / upper limit of the 95% confidence interval?
e.) Interpret the confidence interval.
f.) Based on the confidence interval, which type of the analyst has the greater mean forecast error?
Statistics for Business and Economics
ISBN: 978-0321826237
12th edition
Authors: James T. McClave, P. George Benson, Terry T Sincich